A FRAMEWORK FOR MORE EFFECTIVE
FINANCIAL REPORTING
Corporate financial statements and their related disclosures are fundamental to sound investment decision making. The well-being of global financial markets, and of the investors who entrust their financial present and future to those markets, depends directly on the information financial statements and disclosures provide. The following framework is intended to enhance effectiveness in financial reporting.
Guiding Principles
• The primary financial statements must provide the information needed by equity investors, creditors, and other suppliers of risk capital.
• In financial reporting, standard-setting as well as statement preparation, the entity must be viewed from the perspective of an investor in the common equity issued by the company.
• Fair value information is the most relevant information for financial decision making.
• Recognition and disclosure must be determined by the relevance of the information to investment decision making and not based upon measurement reliability alone.
• All transactions and events must be recognized as they occur in the financial statements.
• Investors’ information requirements must determine the materiality threshold.
• Financial reporting must be neutral.
• All changes in net assets, including changes in fair values, must be recorded in a single financial statement, the
Statement of Changes in Net Assets
Available to Common Shareowners.
• The cash flow statement provides information essential to the analysis of a company and should be prepared using the direct method only.
• Changes affecting each of the financial statements should be reported and explained on a disaggregated basis.
• Individual line items should be reported based upon the nature of the items rather than by the function for which they are used.

A